United We Stand

Canada is due for a national renovation in the collection of its property and casualty insurance claims data.

At the centre of the renovation should be a way to share data for the purpose of benefiting the entire P&C insurance industry as a whole.

No doubt individual insurers will continue to do battle with each other in a competitive arena, trying to find the best means to slice and dice data so they can offer comprehensive insurance products at competitive, affordable and profitable rates.
But these gladiatorial combats between individual companies can favour the secrecy of data collection at the expense of sharing data that may help the industry understand wider claims patterns – take, for example, auto fraud, flooded homes or increased construction costs due to demand surge. Sometimes data required to isolate these broader patterns are not available, because insurers feel to give up the information would create a competitive disadvantage.

But in the example of auto fraud in Ontario, the issue confronting all auto insurers simply became too broad to ignore. Thus, a model for industry-wide data sharing was born: Health Claims for Auto Insurance (HCAI). All Ontario health care providers are required under regulation to submit their treatment plans to the province’s auto insurers through HCAI, an electronic database. By doing so, insurers, health care providers and the regulator can better monitor who is claiming how much for what claims and treatment plans. With this information, insurers, regulators and stakeholders will have a better handle on industry-wide trends in the province’s auto insurance industry.

It will take some time before the HCAI database contains enough historical information to ascertain where auto insurer’s claims dollars are going. In the meantime, it would be interesting to see how this provincial example of data-sharing for the benefit of all P&C insurers (and policyholders) might be extrapolated into other areas of the business.

For example, it doesn’t take much imagination to envision a national form of HCAI that extended beyond the borders of Ontario. Just as the non-profit organization HCAI Processing has been established to oversee the HCAI project and database, a similar arms-length national organization could be established to oversee a national electronic database for auto insurance. This would allow for a much broader pool of auto claims information, and give insurers a better sense of local as well as national trends.

Another possibility would be to create a similar sort of electronic database for use in the home insurance area. The analogy would be for contractors and renovators to submit their expenses to a national electronic database, so that insurers (and regulators) could get a better handle on home insurance claims patterns, and more specifically a sense of which repairs are costing insurers how much.

Such aggregated home insurance claims data would no doubt be of great use in determining more precisely the effects of “demand surge” (the increase in costs related to paying more for labour and materials during times of scarce supply).

A similar database could help the industry in its discussions with the federal government, provincial and municipal governments about flooding issues. In the same way HCAI can identify potential areas for fraudulent auto insurance claims, a national database for home insurance claims would help monitor where the industry (and consumers) might be paying too much to repair or replace damaged or lost homes. This is especially important since Canada has guaranteed replacement costs in its home policies. Having a database of these costs nationally would be helpful in determining whether or not GRC policies should be capped.

The key here is that information sharing among insurers is required to resolve some of the key dilemmas the industry faces going forward. In order to share the data, technology is required to allow that to happen. We have examples of how such systems might work – HCAI, for example – and the key is to see whether they can be extrapolated for the benefit of the insurance industry and consumers across the country.